BRAINSWAY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
U.S. DOLLARS IN THOUSANDS
INDEX
Auditors' Report - Internal Control over Financial Reporting
Auditors' Report - Annual Financial Statements
Consolidated Statements of Financial Position
Consolidated Statements of Profit or Loss and Other Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Page
2 - 3
4
5
6
7
8
Notes to Consolidated Financial Statements
9 - 59
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Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
AUDITORS' REPORT
To the Shareholders of
BRAINSWAY LTD.
Regarding the Audit of Components of Internal Control over Financial Reporting
Pursuant to Section 9b(c) to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970
We have audited the components of internal control over financial reporting of Brainsway Ltd. and its
subsidiaries (collectively, "the Company") as of December 31, 2016. Control components were determined as
explained in the following paragraph. The Company's board of directors and management are responsible for
maintaining effective internal control over financial reporting, and for their assessment of the effectiveness of
the components of internal control over financial reporting included in the accompanying periodic report for
said date. Our responsibility is to express an opinion on the Company's components of internal control over
financial reporting based on our audit.
The components of internal control over financial reporting audited by us were determined in conformity
with Auditing Standard 104 of the Institute of Certified Public Accountants in Israel, "Audit of Components
of Internal Control over Financial Reporting" as amended ("Auditing Standard 104"). These components
consist of: (1) entity level controls, including financial reporting preparation and closing process controls
which include controls related to warrants, options and liabilities, and information technology general controls;
(2) controls over treasurership (3) controls over the revenue recognition process; (4) controls over the property,
plant and equipment process (collectively, "the audited control components").
We conducted our audit in accordance with Auditing Standard 104. That Standard requires that we plan
and perform the audit to identify the audited control components and obtain reasonable assurance about
whether these control components have been effectively maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, identifying the audited control
components, assessing the risk that a material weakness exists regarding the audited control components and
testing and evaluating the design and operating effectiveness of the audited control components based on the
assessed risk. Our audit of these control components also included performing such other procedures as we
considered necessary in the circumstances. Our audit only addressed the audited control components, as
opposed to internal control over all the material processes in connection with financial reporting and, therefore,
our opinion addresses solely the audited control components. Moreover, our audit did not address any
reciprocal effects between the audited control components and unaudited ones and, accordingly, our opinion
does not take into account any such possible effects. We believe that our audit provides a reasonable basis for
our opinion within the context described above.
- 2 -
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
Because of its inherent limitations, internal control over financial reporting as a whole, and specifically
the components therein, may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company effectively maintained, in all material respects, the audited control
components as of December 31, 2016.
We have also audited, in accordance with generally accepted auditing standards in Israel, the
consolidated financial statements of the Company as of December 31, 2016 and 2015 and for each of the three
years in the period ended December 31, 2016 and our report dated March 19, 2017 expressed an unqualified
opinion thereon.
Tel-Aviv, Israel
March 19, 2017
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 3 -
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
AUDITORS' REPORT
To the Shareholders of
BRAINSWAY LTD.
We have audited the accompanying consolidated statements of financial position of Brainsway Ltd.
("the Company") as of December 31, 2016 and 2015, and the related consolidated statements of profit or loss
and other comprehensive income, changes in equity and cash flows for each of the three years in the period
ended December 31, 2016. These financial statements are the responsibility of the Company's board of
directors and management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards in Israel, including
those prescribed by the Auditors' Regulations (Auditor's Mode of Performance), 1973. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by the board of directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company and its subsidiaries as of December 31, 2016
and 2015, and their results of operations, changes in equity and their cash flows for each of the three years in
the period ended December 31, 2016, in conformity with International Financial Reporting Standards ("IFRS")
and with the provisions of the Israeli Securities Regulations (Annual Financial Statements), 2010.
We have also audited, in accordance with Auditing Standard 104 of the Institute of Certified Public
Accountants in Israel, "Audit of Components of Internal Control over Financial Reporting", the Company's
components of internal control over financial reporting as of December 31, 2016 and our report dated
March 19, 2017 expressed an unqualified opinion on the effective existence of those components.
Tel-Aviv, Israel
March 19, 2017
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 4 -
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term deposits
Trade receivables, net
Other accounts receivable
NON-CURRENT ASSETS:
Long-term leasing deposits
Property, plant and equipment, net
Intangible assets
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
Other accounts payable
Deferred revenues
Liability in respect of research and development grants
NON-CURRENT LIABILITIES:
Deferred revenues and other liabilities
Liability in respect of research and development grants
Liability in respect of share options to investors
EQUITY:
Share capital
Share premium
Reserve for transaction with controlling shareholder
Share-based payment
Adjustments arising from translating financial statements from
functional currency to presentation currency
Accumulated deficit
Note
5
6
7
8
9
10
11
12
17e
13b
17h, 17j
13b
13c
18
19
BRAINSWAY LTD.
December 31,
2016
2015
U.S. dollars in thousands
9,174
585
2,492
859
13,110
24
6,821
9
6,854
11,355
585
2,009
915
14,864
34
7,329
16
7,379
19,964
22,243
810
1,436
1,861
288
4,395
374
4,908
-
5,282
149
56,585
917
2,872
(2,188)
(48,048)
10,287
19,964
944
1,228
2,526
198
4,896
193
4,204
55
4,452
147
56,016
917
3,654
(2,188)
(45,651)
12,895
22,243
The accompanying notes are an integral part of the consolidated financial statements.
March 19, 2017
Date of approval of the
financial statements
Dr. David Zchut
Chairman of the Board
and Interim CEO
Avner Hagai
Authorized Signatory by
the Board (see Note 24)
Hadar Levi
CFO
- 5 -
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
BRAINSWAY LTD.
Note
20a
20b
20c
20d
20e
20f
20g
Revenues
Cost of revenues
Gross profit
Research and development expenses, net
Selling and marketing expenses
General and administrative expenses
Operating loss
Finance income
Finance expenses
Loss before tax
Loss
Other comprehensive loss:
Amounts that will not be reclassified
subsequently to profit or loss:
Adjustments arising from translating financial
statements from functional currency to
presentation currency
Total comprehensive loss
2016
Year ended December 31,
2015
U.S. dollars in thousands
(except per share data)
*) 2014
11,524
2,427
9,097
3,792
5,180
2,194
2,069
(186)
514
2,397
2,397
6,800
1,466
5,334
4,103
3,281
2,455
4,505
(636)
218
4,087
4,087
3,380
656
2,724
6,438
1,896
1,667
7,277
(3,195)
2,463
6,545
6,545
-
121
2,397
4,208
2,119
8,664
Basic loss per share (in dollars)
21
(0.17)
(0.28)
(0.46)
Diluted loss per share (in dollars)
(0.17)
(0.28)
(0.56)
*)
Retroactively adjusted for change in presentation currency, see Note 2d.
The accompanying notes are an integral part of the consolidated financial statements.
- 6 -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Reserve for
transaction
with
controlling
shareholder
Reserve for
share-based
payment
transactions
Share
capital
Share
premium
BRAINSWAY LTD.
Adjustments
arising from
translating
financial
statements
from
functional
currency to
presentation
currency
Accumulated
deficit
Total
equity
U.S. dollars in thousands
Balance at January 1, 2014
133
40,879
917
959
52
(35,019)
7,921
Total comprehensive loss
Issue of shares, net
Forfeiture of share options
Exercise of share options
Cost of share-based payment
Balance at December 31,
2014
Total comprehensive loss
Forfeiture and expiration of
share options
Exercise of share options
Cost of share-based payment
Balance at December 31,
2015
Total comprehensive loss
Forfeiture and expiration of
share options
Exercise of share options
Cost of share-based payment
Balance at December 31,
2016
-
9
-
4
-
-
11,756
-
3,060
-
-
-
-
-
-
-
-
(24)
(16)
1,531
(2,119)
-
-
-
-
(6,545)
-
-
-
-
(8,664)
11,765
(24)
3,048
1,531
146
55,695
917
2,450
(2,067)
(41,564)
15,577
-
-
1
-
-
103
218
-
-
-
-
-
-
(121)
(4,087)
(4,208)
(247)
(120)
1,571
-
-
-
-
-
-
(144)
99
1,571
147
56,016
917
3,654
(2,188)
(45,651)
12,895
-
-
2
-
-
313
256
-
-
-
-
-
-
(2,081)
(79)
1,378
-
-
-
-
(2,397)
(2,397)
-
-
-
(1,768)
179
1,378
149
56,855
917
2,872
(2,188)
(48,048)
10,287
The accompanying notes are an integral part of the consolidated financial statements.
- 7 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Loss
Adjustments to reconcile loss to net cash used in operating activities:
Adjustments to the profit or loss items:
Capital loss (gain)
Depreciation and amortization
Finance expenses (income), net
Cost of share-based payment
Changes in asset and liability items:
Increase in trade receivables
Decrease (increase) in other accounts receivable
Increase (decrease) in trade payable
Increase in other accounts payable
Increase (decrease) in deferred revenues
Cash paid and received during the year for:
Interest received
BRAINSWAY LTD.
2016
Year ended December 31,
2015
U.S. dollars in thousands
*) 2014
(2,397)
(4,087)
(6,545)
6
649
328
(420)
563
(499)
56
137
208
(482)
(580)
12
12
(1)
611
(418)
1,416
1,608
(1,162)
(409)
(437)
51
(133)
(2,090)
17
17
-
336
(732)
1,408
1,012
(699)
(115)
550
381
1,530
1,647
93
93
Net cash used in operating activities
(2,402)
(4,552)
(3,793)
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment and intangible assets
Sale of short-term investments, net
Investment in (withdrawal of) long-term deposits, net
Net cash used in investing activities
Cash flows from financing activities:
Receipt of Government grants
Repayment of liability in respect of Government grants
Exercise of share options
Proceeds from issue of securities, net
Net cash provided by financing activities
Exchange differences and commissions on balances of cash and cash equivalents
Adjustments arising from translating financial statements from functional
currency to presentation currency
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
(a)
Significant non-cash transactions:
Exercise of options which were presented as equity liability
Purchase of property, plant and equipment on current suppliers' credit
5
(408)
-
10
(393)
717
(326)
179
-
570
44
-
(2,181)
11,355
9,174
-
-
2
(2,270)
495
(5)
(1,778)
577
(162)
99
-
514
(91)
1
(5,906)
17,261
11,355
-
295
-
(1,496)
423
(12)
(1,085)
383
(67)
1,346
11,765
13,427
186
(2,146)
6,589
10,672
17,261
1,702
463
*)
Retroactively adjusted for change in presentation currency, see Note 2d.
The accompanying notes are an integral part of the consolidated financial statements.
- 8 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 1:- GENERAL
a.
A general description of the Company and its activity:
Brainsway Ltd. ("the Company") was formed on November 7, 2006 with the purpose of
holding 100% of the rights to shares of Brainsway Inc.
b.
c.
d.
e.
Brainsway Inc. ("Inc") was formed in March 2003 in Delaware, US. In August 2003, Inc
formed a wholly owned sub-subsidiary, Moach R&D Services Ltd., which is engaged in
research, development, production and marketing of a non-invasive medical device for
treatment of a wide range of brain disorders ("Moach"). As of December 31, 2015, pursuant
to an investment agreement entered between the parties on December 31, 2012 and revised
in 2014, Moach is 54.13% held by the Company and 45.87% by Inc.
In November 2014, Inc formed a wholly owned subsidiary, Brainsway USA Inc. in
Delaware, US with the purpose of developing an independent array of marketing, support
and logistics services in the US. The company started its operation in January 2015.
On January 9, 2013, the US Food and Drug Administration ("FDA") approved the
Company's Deep TMS device for the treatment of depression in patients. The Group earns
revenues from the sale and lease of devices since the end of 2009.
The Company has negative cash flows from operating activities and operating loss of
approximately $ 2.4 million and $ 2.1 million for the year ended December 31, 2016,
respectively. The Company's management and Board believe that the Company will have
the required financial sources to finance its business activity according to its plans in the
foreseeable future.
f.
Definitions:
In these financial statements:
The Company
- Brainsway Ltd.
The Group
- The Company and its investees, as indicated in this Note.
Subsidiaries
- Companies that are controlled by the Company (as defined in
IFRS 10) and whose accounts are consolidated with those of
the Company.
Related parties
- As defined in IAS 24.
Interested parties and
- As defined in the Israeli Securities Regulations (Annual
controlling shareholder
Financial Statements), 2010.
Dollar
- US dollar.
- 9 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in the financial statements for
all periods presented, unless otherwise stated.
a.
Basis of presentation of the financial statements:
These financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS"). Furthermore, the financial statements have been prepared
in conformity with the provisions of the Israeli Securities Regulations (Annual Financial
Statements), 2010.
The Company's financial statements have been prepared on a cost basis, except for: certain
financial instruments which are presented at fair value through profit or loss.
The Company has elected to present the profit or loss items using the function of expense
method.
b.
The operating cycle:
The Company's operating cycle is one year.
c.
Consolidated financial statements:
The consolidated financial statements comprise the financial statements of companies that
are controlled by the Company (subsidiaries). Control is achieved when the Company has
power over the investee, is exposed or has rights to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the
investee. In assessing control, the effect of potential voting rights is considered only if they
are substantive. The consolidation of the financial statements commences on the date on
which control is obtained and ends when such control ceases.
The financial statements of the Company and of the subsidiaries are prepared as of the same
dates and periods. The accounting policies in the financial statements of the subsidiaries
have been applied consistently and uniformly with those applied in the financial statements
of the Company. Significant intragroup balances and transactions and gains or losses
resulting from transactions between the Company and the subsidiaries are eliminated in
full in the consolidated financial statements.
d.
Functional currency, presentation currency and foreign currency:
1.
Functional currency and presentation currency:
The presentation currency of the financial statements is the US dollar.
The functional currency is the currency that best reflects the economic environment
in which the Company operates and conducts its transactions, is separately
determined for each Group entity and is used to measure its financial position and
operating results. The Group determines the functional currency of each Group
entity.
- 10 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Until September 30, 2015, the functional currency and presentation currency of
Brainsway Ltd., Inc and Moach was the NIS. Since October 1, 2015, the US dollar
constitutes the functional currency of Brainsway Ltd., Inc and Moach due to the
focusing on the US market as well as commencement of significant activity of the
US subsidiary commenced in the US and since it is expected that revenue will
continue to be nominated in US dollars.
Considering the above, since October 1, 2015, the functional currency of the
Company and its subsidiaries was changed prospectively from NIS to US dollars.
Also, since that date the Company changed the presentation currency in the financial
statements to US dollar. This change was made retroactively. Comparative data were
restated so now they are all presented in the new presentation currency (the US
dollar). The effect of the change in the presentation currency on prior periods was
recorded in capital reserve from translation into the presentation currency in the
statement of comprehensive income.
2.
Transactions, assets and liabilities in foreign currency:
Transactions denominated in foreign currency are recorded upon initial recognition
at the exchange rate at the date of the transaction. After initial recognition, monetary
assets and liabilities denominated in foreign currency are translated at each reporting
date into the functional currency at the exchange rate at that date. Exchange rate
differences are recognized in profit or loss. Non-monetary assets and liabilities
denominated in foreign currency and measured at cost are translated at the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated
in foreign currency and measured at fair value are translated into the functional
currency using the exchange rate prevailing at the date when the fair value was
determined.
e.
Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted short-
term bank deposits with an original maturity of three months or less from the date of
investment or with a maturity of more than three months, but which are redeemable on
demand without penalty and which form part of the Group's cash management.
f.
Short-term deposits:
Short-term bank deposits are deposits with an original maturity of more than three months
from the date of investment and which do not meet the definition of cash equivalents. The
deposits are presented according to their terms of deposit.
- 11 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g.
Allowance for doubtful accounts:
The allowance for doubtful accounts is determined in respect of specific trade receivables
whose collection, in the opinion of the Company's management, is doubtful. The Company
did not recognize an allowance in respect of groups of customers that are collectively
assessed for impairment since it did not identify any groups of customers which bear similar
credit risks. Impaired receivables are derecognized when they are assessed as uncollectible.
h.
Revenue recognition:
Revenues are recognized in profit or loss when the revenues can be measured reliably, it is
probable that the economic benefits associated with the transaction will flow to the
Company and the costs incurred or to be incurred in respect of the transaction can be
measured reliably. Revenues are measured at the fair value of the consideration less any
trade discounts and volume rebates.
Following are the specific revenue recognition criteria which must be met before revenue
is recognized:
Revenues from sale of devices:
Revenues from sale of goods are recognized when all the significant risks and rewards of
ownership of the goods have passed to the buyer and the seller no longer retains continuing
managerial involvement. The delivery date is usually the date on which ownership passes.
Revenues from lease of devices:
Rental income is recognized on a straight-line basis over the lease term.
i.
Government grants:
Government grants are recognized when there is reasonable assurance that the grants will
be received and the Company will comply with all attached conditions.
Government grants received from the Office of the Chief Scientist in Israel are recognized
upon receipt as a liability if future economic benefits are expected from the research project
that will result in royalty-bearing sales.
A liability for the loan is first measured at fair value using a discount rate that reflects a
market rate of interest. The difference between the amount of the grant received and the
fair value of the liability is accounted for as a Government grant and recognized as a
reduction of research and development expenses. After initial recognition, the liability is
measured at amortized cost using the effective interest method. Royalty payments are
treated as a reduction of the liability.
- 12 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
If no economic benefits are expected from the research activity, the grant receipts are
recognized as a reduction of the related research and development expenses. In that event,
the royalty obligation is treated as a contingent liability in accordance with IAS 37.
In each reporting date, the Company evaluates whether there is reasonable assurance that
the liability recognized, in whole or in part, will not be repaid based on the best estimate of
future sales and using the original effective interest method and, if so, the appropriate
amount of the liability is derecognized against a corresponding reduction in research and
development expenses.
Grants received from the Chief Scientist prior to January 1, 2009, which are recognized as
a liability, are accounted for as forgivable loans in accordance with IAS 20, based on the
original terms of the loan.
Amounts paid as royalties are recognized as settlement of the liability.
j.
Leases:
The criteria for classifying leases as finance or operating leases depend on the substance of
the agreements and are made at the inception of the lease in accordance with the following
principles as set out in IAS 17.
The Group as lessee:
Finance leases:
A lease that transfers all the risks and rewards incidental to ownership of the leased asset
to the Group is classified as a finance lease. At the commencement of the lease term, the
leased asset is measured at the lower of the fair value of the leased asset or the present value
of the minimum lease payments.
The leased asset is depreciated over the shorter of its useful life and the lease term.
Operating leases:
Leases in which substantially all the risks and rewards of ownership of the leased asset are
not transferred are classified as operating leases. Lease payments are recognized as an
expense in profit or loss on a straight-line basis over the lease term.
- 13 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Group as lessor:
Finance leases:
In finance leases, all the risks and rewards incidental to ownership of the leased asset are
transferred to the lessee. The leased asset is derecognized and recognized as a financial
asset, "receivables for finance lease", at the present value of the lease payments. After initial
recognition, the lease payments are apportioned between finance income and collection of
the receivable for the lease. The financial asset, "receivables for finance lease", is tested for
impairment and derecognized as prescribed in IAS 39.
Operating leases:
Leases in which substantially all the risks and rewards incidental to ownership of the leased
asset are not transferred to the lessee are classified as operating leases. Rental income is
recognized in profit or loss on a straight-line basis over the lease term. Initial direct costs
incurred in respect of the lease agreement are added to the carrying amount of the leased
asset and recognized as an expense over the lease term on the same basis as the rental
income. Contingent rent is recognized as income in the statement of profit or loss when the
Company is entitled to receive such income.
k.
Taxes on income:
Current or deferred taxes are recognized in profit or loss, except to the extent that they
relate to items which are recognized in other comprehensive income or equity.
1.
Current taxes:
The current tax liability is measured using the tax rates and tax laws that have been
enacted or substantively enacted by the reporting date as well as adjustments
required in connection with the tax liability in respect of previous years.
2.
Deferred taxes:
Deferred taxes are computed in respect of temporary differences between the
carrying amounts in the financial statements and the amounts attributed for tax
purposes.
Deferred taxes are measured at the tax rate that is expected to apply when the asset
is realized or the liability is settled, based on tax laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets are reviewed at each reporting date and reduced to the extent that
it is not probable that they will be utilized. Temporary differences for which deferred
tax assets had not been recognized are reviewed at each reporting date and a
respective deferred tax asset is recognized to the extent that their utilization is
probable.
- 14 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l.
Property, plant and equipment:
Items of property, plant and equipment are measured at cost, including direct acquisition
costs, less accumulated depreciation and excluding day-to-day servicing expenses.
The cost of self-constructed assets includes the cost of materials, direct labor and share-
based payment as well as any costs directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the manner intended by
management.
Depreciation is calculated on a straight-line basis over the useful life of the assets at annual
rates as follows:
%
Mainly %
Laboratory equipment
Motor vehicles
Computers
Office furniture and equipment
Leased equipment
Leasehold improvements
15
15
33
6 - 15
14 - 15
see below
7
15
Leasehold improvements are depreciated on a straight-line basis over the shorter of the
lease term (including the extension option held by the Group and intended to be exercised)
and the expected life of the improvement.
The useful life, depreciation method and residual value of an asset are reviewed at least
each year-end and any changes are accounted for prospectively as a change in accounting
estimate. Depreciation of an asset ceases at the earlier of the date that the asset is classified
as held for sale and the date that the asset is derecognized.
m.
Intangible assets:
Separately acquired intangible assets are measured on initial recognition at cost including
direct acquisition costs. Intangible assets acquired in a business combination are measured
at fair value at the acquisition date. Expenditures relating to internally generated intangible
assets, excluding capitalized development costs, are recognized in profit or loss when
incurred.
Intangible assets with a finite useful life are amortized over their useful life and reviewed
for impairment whenever there is an indication that the asset may be impaired. The
amortization period and the amortization method for an intangible asset are reviewed at
least at each year end.
- 15 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The useful life of intangible assets is as follows:
Computer software license
License
Research and development expenditures:
%
3
18
Research and development expenditures are recognized in profit or loss when incurred. An
intangible asset arising from a development project or from an internal development is
recognized if the Company can demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or sale; the Company's intention to
complete the intangible asset and use or sell it; the Company's ability to use or sell the
intangible asset; how the intangible asset will generate future economic benefits; the
availability of adequate technical, financial and other resources to complete the intangible
asset; and the Company's ability to measure reliably the expenditure attributable to the
intangible asset during its development.
The Company does not recognize an intangible asset as above because it does not meet the
above criteria.
Software:
The Group's assets include computer systems comprising hardware and software. Software
forming an integral part of the hardware to the extent that the hardware cannot function
without the programs installed on it is classified as property, plant and equipment. In
contrast, stand-alone software that adds functionality to the hardware is classified as an
intangible asset.
License:
The Company has an exclusive license to develop, manufacture, make use of, market, sell
and import products and processes to be developed in the framework of the license
agreement detailed in Note 17j.
n.
Impairment of non-financial assets:
The Company evaluates the need to record an impairment of non-financial assets whenever
events or changes in circumstances indicate that the carrying amount is not recoverable.
If the carrying amount of non-financial assets exceeds their recoverable amount, the assets
are reduced to their recoverable amount. The recoverable amount is the higher of fair value
less costs of sale and value in use. In measuring value in use, the expected cash flows are
discounted using a pre-tax discount rate that reflects the risks specific to the asset.
- 16 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The recoverable amount of an asset that does not generate independent cash flows is
determined for the cash-generating unit to which the asset belongs. Impairment losses are
recognized in profit or loss.
An impairment loss of an asset is reversed only if there have been changes in the estimates
used to determine the asset's recoverable amount since the last impairment loss was
recognized. Reversal of an impairment loss, as above, shall not be increased above the
lower of the carrying amount that would have been determined (net of depreciation or
amortization) had no impairment loss been recognized for the asset in prior years and its
recoverable amount. The reversal of impairment loss of an asset presented at cost is
recognized in profit or loss.
o.
Financial instruments:
1.
Financial assets:
Financial assets within the scope of IAS 39 are initially recognized at fair value plus
direct transaction costs, except for financial assets measured at fair value through
profit or loss in respect of which transaction costs are recorded in profit or loss.
After initial recognition, the accounting treatment of financial assets is based on their
classification as follows:
Loans and receivables:
Loans and receivables are investments with fixed or determinable payments that are
not quoted in an active market. After initial recognition, loans are measured based
on their terms at cost plus direct transaction costs using the effective interest method
and less any impairment losses. Short-term borrowings are measured based on their
terms, normally at face value.
2.
Financial liabilities:
Financial liabilities within the scope of IAS 39 are initially recognized at fair value.
Loans and other liabilities measured at amortized cost are presented less direct
transaction costs. After initial recognition, the accounting treatment of financial
liabilities is based on their classification as follows:
a)
Financial liabilities at amortized cost:
After initial recognition, loans and other liabilities are measured based on their
terms at cost less direct transaction costs using the effective interest method.
- 17 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b)
Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss include financial
liabilities designated upon initial recognition as at fair value through profit or
loss.
A liability may be designated upon initial recognition at fair value through
profit or loss, subject to the provisions of IAS 39.
3.
Offsetting financial instruments:
Financial assets and financial liabilities are offset and the net amount is presented in
the statement of financial position if there is a legally enforceable right to set off the
recognized amounts and there is an intention either to settle on a net basis or to realize
the asset and settle the liability simultaneously. The right of set-off must be legally
enforceable not only during the ordinary course of business of the parties to the
contract but also in the event of bankruptcy or insolvency of one of the parties. In
order for the right of set-off to be currently available, it must not be contingent on a
future event, there may not be periods during which the right is not available, or there
may not be any events that will cause the right to expire.
4.
Derecognition of financial instruments:
a)
Financial assets:
A financial asset is derecognized when the contractual rights to the cash flows
from the financial asset expire or the Company has transferred its contractual
rights to receive cash flows from the financial asset or assumes an obligation
to pay the cash flows in full without material delay to a third party and has
transferred substantially all the risks and rewards of the asset, or has neither
transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
b)
Financial liabilities:
A financial liability is derecognized when it is extinguished, that is when the
obligation is discharged or cancelled or expires. A financial liability is
extinguished when the debtor (the Group) discharges the liability by paying
in cash, other financial assets, goods or services; or is legally released from
the liability.
5.
Impairment of financial assets:
The Group assesses at each reporting date whether there is any objective evidence
of impairment of a financial asset or group of financial assets as follows.
- 18 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Financial assets carried at amortized cost:
Objective evidence of impairment exists when one or more events that have occurred
after initial recognition of the asset have a negative impact on the estimated future
cash flows. The amount of the loss recorded in profit or loss is measured as the
difference between the asset's carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not yet been incurred)
discounted at the financial asset's original effective interest rate. If the financial asset
has a variable interest rate, the discount rate is the current effective interest rate. In a
subsequent period, the amount of the impairment loss is reversed if the recovery of
the asset can be related objectively to an event occurring after the impairment was
recognized. The amount of the reversal, up to the amount of any previous
impairment, is recorded in profit or loss.
p.
Fair value measurement:
Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
Fair value measurement is based on the assumption that the transaction will take place in
the asset's or the liability's principal market, or in the absence of a principal market, in the
most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.
Fair value measurement of a non-financial asset takes into account a market participant's
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or for which fair value is disclosed are
categorized into levels within the fair value hierarchy based on the lowest level input that
is significant to the entire fair value measurement:
Level 1
- quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2
- inputs other than quoted prices included within Level 1 that are observable
either directly or indirectly.
Level 3
- inputs that are not based on observable market data (valuation techniques
which use inputs that are not based on observable market data).
- 19 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
q.
Provisions:
A provision in accordance with IAS 37 is recognized when the Group has a present
obligation (legal or constructive) as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
r.
Employee benefit liabilities:
The Group has several employee benefit plans:
1.
Short-term employee benefits:
Short-term employee benefits are benefits that are expected to be settled wholly
before twelve months after the end of the annual reporting period in which the
employees render the related services. These benefits include salaries, paid annual
leave, paid sick leave, recreation and social security contributions and are recognized
as expenses as the services are rendered. A liability in respect of a cash bonus or a
profit-sharing plan is recognized when the Company has a legal or constructive
obligation to make such payment as a result of past service rendered by an employee
and a reliable estimate of the amount can be made.
2.
Post-employment benefits:
The plans are normally financed by contributions to insurance companies and
classified as defined contribution plans or as defined benefit plans.
The Group has defined contribution plans pursuant to section 14 to the Severance
Pay Law under which the Group pays fixed contributions and will have no legal or
constructive obligation to pay further contributions if the fund does not hold
sufficient amounts to pay all employee benefits relating to employee service in the
current and prior periods.
Contributions to the defined contribution plan in respect of severance or retirement
pay are recognized as an expense when contributed concurrently with performance
of the employee's services and no additional provision is required in the financial
statements. See also Note 15.
s.
Share-based payment transactions:
The Company's employees and other service providers are entitled to remuneration in the
form of equity-settled share-based payment.
- 20 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Equity-settled transactions:
The cost of equity-settled transactions with employees is measured at the fair value of the
equity instruments granted at grant date. The fair value is determined using an acceptable
option pricing model.
The cost of equity-settled transactions is recognized in profit or loss together with a
corresponding increase in equity during the period which the performance and/or service
conditions are to be satisfied ending on the date on which the relevant employees become
entitled to the award ("the vesting period"). The cumulative expense recognized for equity-
settled transactions at the end of each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the Group's best estimate of the number of
equity instruments that will ultimately vest.
No expense is recognized for awards that do not ultimately vest.
t.
Loss per share:
Loss per share is calculated by dividing the loss attributable to equity holders of the
Company by the weighted number of Ordinary shares outstanding during the period.
Basic loss per share includes only shares that are outstanding during the period.
Potential Ordinary shares are included in the computation of diluted loss per share when
their effect decreases loss per share from continuing operations. Potential Ordinary shares
that are converted during the period are included in diluted loss per share only until the
conversion date and from that date in basic loss per share. The Company's share of losses
of investees is included based on its share of loss per share of the investees multiplied by
the number of shares held by the Company.
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
In the process of applying the significant accounting policies in the financial statements, the
Group has made the following judgments which have the most significant effect on the amounts
recognized in the financial statements:
a.
Judgments:
-
Classification of leases:
In order to determine whether to classify a lease as a finance lease or an operating
lease, the Company evaluates whether the lease transfers substantially all the risks
and benefits incidental to ownership of the asset. In this respect, the Company
evaluates such criteria as the existence of a bargain purchase option, the lease term
in relation to the economic life of the asset and the present value of the minimum
lease payments in relation to the fair value of the asset.
- 21 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)
b.
Estimates and assumptions:
The preparation of the financial statements requires management to make estimates and
assumptions that have an effect on the application of the accounting policies and on the
reported amounts of assets, liabilities, revenues and expenses. Changes in accounting
estimates are reported in the period of the change in estimate.
The key assumptions made in the financial statements concerning uncertainties at the
reporting date and the critical estimates computed by the Group that may result in a material
adjustment to the carrying amounts of assets and liabilities within the next financial year
are discussed below.
-
Grants from the Scientist:
Government grants received from the Chief Scientist at the Ministry of Economy
("OCS") are recognized as a liability if future economic benefits are expected from
the research and development activity that will result in royalty-bearing sales. There
is uncertainty regarding the estimated future cash flows and discount rate used to
measure the amount of the liability.
-
Liability in respect of share options to investors:
The liability in respect of share options to investors is a financial instrument
presented at fair value through profit or loss. There is uncertainty regarding the
Company's management estimates as to the probability of certain scenarios that were
used to compute the derivative to occur.
-
Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined upon initial
recognition by an acceptable option pricing model. The model is based on share price
and exercise price and assumptions regarding expected volatility, life of share option,
dividend and risk-free interest rate.
- 22 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION
a.
IFRS 9, "Financial Instruments":
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial
Instruments", which replaces IAS 39, "Financial Instruments: Recognition and
Measurement". IFRS 9 mainly focuses on the classification and measurement of financial
assets and it applies to all assets in the scope of IAS 39.
According to IFRS 9, all financial assets are measured at fair value upon initial recognition.
In subsequent periods, debt instruments are measured at amortized cost only if both of the
following conditions are met:
-
-
the asset is held within a business model whose objective is to hold assets in order
to collect the contractual cash flows.
the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
IFRS 9 also includes a new model for measurement of impairment of financial assets.
Subsequent measurement of all other debt instruments and financial assets should be at fair
value. IFRS 9 establishes a distinction between debt instruments to be measured at fair
value through profit or loss and debt instruments to be measured at fair value through other
comprehensive income.
Financial assets that are equity instruments should be measured in subsequent periods at
fair value and the changes recognized in profit or loss or in other comprehensive income
(loss), in accordance with the election by the Company on an instrument-by-instrument
basis. If equity instruments are held for trading, they should be measured at fair value
through profit or loss.
According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and
to financial liabilities for which the fair value option has not been elected.
According to IFRS 9, changes in fair value s of financial liabilities which are attributable
to the change in credit risk should be presented in other comprehensive income. All other
changes in fair value should be presented in profit or loss.
IFRS 9 also prescribes new hedge accounting requirements.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is
permitted. The Company believes that the adoption of IFRS 9 (including all its phases) is
not expected to have a material impact on the financial statements.
- 23 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
b.
IFRS 15, "Revenue from Contracts with Customers":
In May 2014, the IASB issued IFRS 15 ("IFRS 15").
IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13,
"Customer Loyalty Programs", IFRIC 15, "Agreements for the Construction of Real
Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue - Barter
Transactions Involving Advertising Services".
The IFRS 15 introduces a five-step model that will apply to revenue earned from contracts
with customers:
Step 1: Identify the contract with a customer, including reference to contract combination
and accounting for contract modifications.
Step 2: Identify the distinct performance obligations in the contract.
Step 3: Determine the transaction price, including reference to variable consideration,
financing components that are significant to the contract, non-cash consideration and any
consideration payable to the customer.
Step 4: Allocate the transaction price to the separate performance obligations on a relative
stand-alone selling price basis using observable information, if it is available, or using
estimates and assessments.
Step 5: Recognize revenue when the entity satisfies a performance obligation over time or
at a point in time.
IFRS 15 is to be applied retrospectively for annual periods beginning on or after January 1,
2018. Early adoption is permitted.
IFRS 15 allows the option of modified retrospective adoption with certain reliefs according
to which IFRS 15 will be applied to existing contracts from the initial period of adoption
and thereafter with no restatement of comparative data. Under this option, the Company
will recognize the cumulative effect of the initial adoption of IFRS 15 as an adjustment to
the opening balance of retained earnings (or another component of equity, as applicable)
as of the date of initial application. Alternatively, IFRS 15 permits full retrospective
adoption with certain reliefs.
The Company is evaluating the possible impact of IFRS 15 but is presently unable to assess
its effect, if any, on the financial statements.
- 24 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
c.
Amendments to IAS 7, "Statement of Cash Flows", regarding additional disclosures of
financial liabilities:
In January 2016, the IASB issued amendments to IAS 7, "Statement of Cash Flows", ("the
amendments") which require additional disclosures regarding financial liabilities. The
amendments require disclosure of the changes between the opening balance and the closing
balance of financial liabilities, including changes from cash flows, changes arising from
obtaining or losing control of subsidiaries, the effect of changes in foreign exchange rates
and changes in fair value.
The amendments are to be applied for annual periods beginning on or after January 1, 2017.
Comparative data for periods prior to the effective date of the amendments is not required.
Early adoption is permitted.
The Company will include the necessary disclosures in the financial statements when
applicable.
d.
IFRS 16, "Leases":
In January 2016, the IASB issued IFRS 16, "Leases" ("the new Standard"). According to
the new Standard, a lease is a contract, or part of a contract, that conveys the right to use
an asset for a period of time in exchange for consideration.
According to the new Standard:
Lessees are required to recognize an asset and a corresponding liability in the
statement of financial position in respect of all leases (except in certain cases) similar
to the accounting treatment of finance leases according to the existing IAS 17,
"Leases".
Lessees are required to initially recognize a lease liability for the obligation to make
lease payments and a corresponding right-of-use asset. Lessees will also recognize
interest and depreciation expenses separately.
Variable lease payments that are not dependent on changes in the Israeli CPI or
interest rates, but are based on performance or use (such as a percentage of revenues)
are recognized as an expense by the lessees as incurred and recognized as income by
the lessors as earned.
In the event of change in variable lease payments that are CPI-linked, lessees are
required to remeasure the lease liability and the effect of the remeasurement is an
adjustment to the carrying amount of the right-of-use asset.
- 25 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
The new Standard includes two exceptions according to which lessees are permitted
to elect to apply a method similar to the current accounting treatment for operating
leases. These exceptions are leases for which the underlying asset is of low value
and leases with a term of up to one year.
The accounting treatment by lessors remains substantially unchanged, namely
classification of a lease as a finance lease or an operating lease.
The new Standard is to be applied for annual periods beginning on or after January 1, 2019.
Earlier adoption is permitted provided that IFRS 15, "Revenue from Contracts with
Customers", is applied simultaneously.
For leases existing at the date of transition, the new Standard permits lessees to use either
a full retrospective approach, or a modified retrospective approach, with certain transition
relief whereby restatement of comparative data is not required.
The Company believes that the new Standard is not expected to have a material impact on
the financial statements.
NOTE 5:- CASH AND CASH EQUIVALENTS
Cash for immediate withdrawal
Cash equivalents - short-term deposits (1)
December 31,
2016
2015
U.S. dollars in thousands
8,974
200
9,174
6,541
4,814
11,355
(1)
Short-term deposits at banks are for periods of three months, depending on the requirements
of the Company. The deposits earn interest at the respective term of the deposits (dollar -
0.75% per year).
NOTE 6:- SHORT-TERM DEPOSITS
Bank deposits (1)
December 31,
2015
2016
U.S. dollars in thousands
585
585
(1)
Short-term deposits at banks are for periods of three months and one year, depending on
the requirements of the Company. The deposits earn interest at the respective term of the
deposits (dollar - 0.35%-1.48% per year).
- 26 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 7:- TRADE RECEIVABLES, NET
Open accounts (1)
Credit cards
Checks receivable
Less - allowance for doubtful accounts
Trade receivables, net
December 31,
2015
2016
U.S. dollars in thousands
2,703
23
-
(234)
2,492
1,633
261
285
(170)
2,009
(1) Trade receivables are generally on 90 day credit terms after the date of the transaction.
Certain customers may spread the payments over months by using credit card payment
transactions.
An analysis of past due but not impaired trade receivables (allowance for doubtful accounts),
trade receivables, net, with reference to December 31, 2016:
Past due trade receivables with aging of
Neither
past due
nor
impaired
< 30
days
30 - 60
days
60 - 90
days
U.S. dollars in thousands
90 - 120
days
> 120
days
Total
1,843
190
131
46
219
63
2,492
As of December 31, 2016, the Company has debts more than 90 days past due but not impaired
(allowance for doubtful accounts) in the total of approximately $ 282 thousand, of which an
amount of approximately $ 25 thousand was paid between the reporting date and the date of the
approval of the financial statements. The Company expects to collect the entire amount of these
debts.
An analysis of past due but not impaired trade receivables (allowance for doubtful accounts),
trade receivables, net, with reference to December 31, 2015:
Past due trade receivables with aging of
Neither
past due
nor
impaired
< 30
days
30 - 60
days
60 - 90
days
U.S. dollars in thousands
90 - 120
days
> 120
days
Total
1,439
72
183
86
49
179
2,009
As of December 31, 2015, the Company has debts more than 90 days past due in the total of
approximately $ 230 thousand, of which an amount of approximately $ 180 thousand was paid
by the date of the approval of the financial statements.
- 27 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 8:- OTHER ACCOUNTS RECEIVABLE
Government ministries
Accrued income - Chief Scientist
Prepaid expenses and other
Loans to employees
Supplies
Advances to suppliers
December 31,
2015
2016
U.S. dollars in thousands
291
107
55
22
380
4
859
221
559
16
10
-
109
915
NOTE 9:- PROPERTY, PLANT AND EQUIPMENT
2016
Cost:
Leased
equipment
Equipment
for lease
Laboratory
equipment
Office
furniture
and
equipment
Motor
vehicles Computers
U.S. dollars in thousands
Leasehold
improvements
Total
Balance at January 1, 2016
Additions during the year
Disposals during the year
3,656
1,029
(592)
4,251
1,416
(1,917)
160
-
-
25
-
(24)
269
24
-
74
1
-
75
28
5
-
33
52
-
-
52
45
7
-
52
8,487
2,470
(2,533)
8,424
1,158
675
(230)
1,603
Balance at December 31,
2016
Accumulated depreciation:
Balance at January 1, 2016
Additions during the year
Disposals during the year
Balance at December 31,
2016
Depreciated cost at
December 31, 2016
4,093
3,750
160
1
293
813
584
(218)
1,179
-
-
-
-
99
23
-
11
2
(12)
162
54
-
122
1
216
*)
Represents less than $ 1 thousand.
- 28 -
2,914
3,750
38
*) -
77
42
*) -
6,821
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 9:- PROPERTY, PLANT AND EQUIPMENT (Cont.)
Leased
equipment
Equipment
for lease
Laboratory
equipment
Office
furniture
and
equipment
Motor
vehicles Computers
U.S. dollars in thousands
Leasehold
improvements
Total
2,645
1,287
(461)
3,464
1,261
(248)
151
4
-
23
4
-
172
90
(1)
185
(226)
5
(2)
8
3,656
4,251
160
25
269
2015:
Cost:
Balance at January 1, 2015
Additions during the year
Disposals during the year
Adjustments arising from
translating financial
statements from
functional currency to
presentation currency
Balance at December 31,
2015
Accumulated depreciation:
Balance at January 1, 2015
Additions during the year
Disposals during the year
Adjustments arising from
translating financial
statements from
functional currency to
presentation currency
Balance at December 31,
2015
426
574
(219)
32
813
-
-
-
-
-
Depreciated cost at
December 31, 2015
2,843
4,251
68
3
-
3
74
22
5
-
1
28
46
50
4
-
6,573
2,653
(710)
(2)
(29)
52
8,487
34
11
-
-
45
7
683
657
(220)
38
1,158
7,329
75
22
-
2
99
61
6
6
-
(1)
11
14
120
39
(1)
4
162
107
- 29 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 10:- INTANGIBLE ASSETS
Composition:
Computer software:
Cost
Less - accumulated amortization
Licenses
Cost
Less - accumulated amortization
NOTE 11:- TRADE PAYABLES
Open debts
December 31,
2016
2015
U.S. dollars in thousands
136
(131)
5
9
(5)
4
9
131
(120)
11
9
(4)
5
16
December 31,
2016
2015
U.S. dollars in thousands
810
810
944
944
Trade payables are non-interest bearing and are normally settled on up to 90-day terms.
NOTE 12:- OTHER ACCOUNTS PAYABLE
December 31,
2015
2016
U.S. dollars in thousands
541
772
123
600
501
127
1,436
1,228
Accrued expenses
Employees and payroll accruals
Liabilities to related parties (1)
(1) A current non-interest bearing account.
- 30 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 13:- NON-CURRENT LIABILITIES
a.
Other long-term liabilities are for payment of royalties pursuant to a license agreement. See
Note 17j.
b.
Government grants:
Moach received from the Israeli Government participation grants in research and
development and, in return, it is obligated to pay royalties amounting to 3%-3.5% of sales
of products from such research and development support up to an amount equal to 100%
of total grants received.
As of December 31, 2016, the maximum royalties payable by the company in the future in
respect of active project equal an amount of approximately $ 12,488 thousand, including
exchange differences and interest at the Libor rate. Through December 31, 2016, royalties
paid amounted to $ 590 thousand.
c.
Share options:
The 410,342 share options which had been presented as of December 31, 2015 and granted
to investors under an agreement from April 26, 2012 expired on June 10, 2016, according
to the conditions of the agreement. See Note 18d and e.
NOTE 14:- FINANCIAL INSTRUMENTS
a.
Classification of financial assets and financial liabilities:
The financial assets and financial liabilities in the statement of financial position are
classified by groups of financial instruments pursuant to IAS 39:
December 31,
2016
2015
U.S. dollars in thousands
9,174
3,497
12,671
810
1,436
6
2,252
11,355
3,383
14,738
944
1,228
8
2,180
Financial assets:
Cash and cash equivalents
Other
Total current
Financial liabilities:
Trade payables
Other accounts payable
Other
- 31 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
December 31,
2015
2016
U.S. dollars in thousands
Financial liabilities in respect of share options to
investors - at fair value through profit or loss
-
55
Total other financial liabilities - in respect of
liability to the Chief Scientist
Total current
Total non-current
b.
Financial risks factors:
5,196
2,534
4,914
4,402
2,370
4,267
The Group's activities expose it to various financial risks such as market risks (foreign
currency risk, interest risk), credit risk and liquidity risk. The Group's comprehensive risk
management plan focuses on activities that reduce to a minimum any possible adverse
effects on the Group's financial performance.
The Company's CFO oversees the management of these risks in accordance with the
policies approved by the Board.
1. Market risks:
Foreign currency risk:
The currency exposure arises from current accounts and deposits that are mainly
managed in NIS and from liability in respect of employees and payroll accruals that
are paid for in NIS.
2.
Credit risk:
Credit risk is the risk that a counterparty will not meet its obligations as a customer
or under a financial instrument leading to a loss to the Group. The Group is exposed
to credit risk from its operating activity (primarily trade receivables).
3.
Liquidity risk:
The Group monitors its risk to a shortage of cash using quarterly budget tools.
- 32 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
The table below presents the maturity profile of the Group's financial liabilities based
on contractual undiscounted payments:
December 31, 2016:
Less than
one year
1 to 2
years
2 to 3
3 to 4
years
years
U.S. dollars in thousands
4 to 5
years
> 5
years
Total
Trade payables
Payables
Long-term liabilities
Liability in respect of
research and
development grants
810
1,436
2
137
2,385
7
-
2
283
285
-
-
2
509
511
-
-
2
2,875
2,877
-
-
2
3,415
3,417
-
-
-
6,002
6,002
810
1,436
10
13,22
15,477
December 31, 2015:
Less than
one year
1 to 2
years
3 to 4
2 to 3
years
years
U.S. dollars in thousands
4 to 5
years
> 5
years
Total
Trade payables
Payables
Long-term liabilities
Liability in respect of
research and
development grants
944
1,228
2
112
2,286
-
-
2
221
223
-
-
2
405
407
-
-
2
553
555
-
-
2
2,809
2,809
-
-
2
7,895
7,895
944
1,228
12
11,995
14,179
c.
Fair value:
The carrying amount of cash and cash equivalents, short-term deposits, trade receivables,
other accounts receivable, trade payables, other accounts payable, share options, long-term
liabilities and Scientist's grants approximate their fair value.
Financial liabilities measured at fair value:
December 31, 2016:
Opening balance at January 1, 2016
Amounts transferred to the statement of
comprehensive income as net finance income
for the year
Closing balance at December 31, 2016
- 33 -
Level 3
U.S. dollars
in thousands
55
(55)
-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
During 2015, there were no transfers between Level 1 to Level 2 for fair value
measurements of financial instruments and also there were no transfers out of or into Level
3 for fair value measurements of financial instruments.
d.
Sensitivity tests relating to changes in foreign currency:
Sensitivity test to changes in the NIS exchange
rate:
Gain (loss) from the change:
Increase of 5% in exchange rate
Decrease of 5% in exchange rate
Sensitivity test to changes in the Euro exchange
rate:
Gain (loss) from the change:
Increase of 5% in exchange rate
Decrease of 5% in exchange rate
Sensitivity test to changes in the Yen exchange
rate:
Gain (loss) from the change:
Increase of 5% in exchange rate
Decrease of 5% in exchange rate
December 31,
2016
2015
U.S. dollars in thousands
103
(103)
315
(315)
44
(44)
43
(43)
32
(32)
42
(42)
As of December 31, 2016, the Company has excess of financial assets over financial
liabilities in foreign currency (NIS in relation to US dollar) of $ 2,066 thousand.
As of December 31, 2016, the Company has excess of financial assets over financial
liabilities in foreign currency (Euro in relation to US dollar) of $ 885 thousand.
As of December 31, 2016, the Company has excess of financial assets over financial
liabilities in foreign currency (Yen in relation to US dollar) of $ 855 thousand.
Sensitivity tests and principal work assumptions:
The selected changes in the relevant risk variables were determined based on management's
estimate as to reasonable possible changes in these risk variables.
- 34 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
The Company has performed sensitivity tests of principal market risk factors that are liable
to affect its reported operating results or financial position. The sensitivity tests present the
profit or loss in respect of each financial instrument for the relevant risk variable chosen
for that instrument as of each reporting date. The test of risk factors was determined based
on the materiality of the exposure of the operating results or financial condition of each risk
with reference to the functional currency and assuming that all the other variables are
constant.
NOTE 15:- EMPLOYEE BENEFIT ASSETS AND LIABILITIES
Employee benefits consist of short-term benefits, post-employment benefits and other long-term
benefits.
a.
Post-employment benefits:
According to the labor laws and Severance Pay Law in Israel, the Company is required to
pay compensation to an employee upon dismissal or retirement or to make current
contributions in defined contribution plans pursuant to section 14 to the Severance Pay
Law, as specified below. The Company's liability is accounted for as a benefit after the
completion of employment. The computation of the Company's employee benefit liability
is made in accordance with a valid employment contract based on the employee's salary
and employment term which establish the entitlement to receive the compensation. Post-
employment benefits are normally financed by contributions classified as defined benefit
plans or as defined contribution plans as detailed below.
b.
Defined contribution plans:
Section 14 to the Severance Pay Law, 1963 applies to all of the Company's employees
pursuant to which the fixed contributions paid by the Group into pension funds and/or
policies of insurance companies release the Group from any additional liability to
employees for whom said contributions were made. These contributions and contributions
for benefits represent defined contribution plans.
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Expenses in respect of defined
contribution plans
190
184
167
- 35 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME
a.
Tax laws applicable to the Company and Moach:
Income Tax (Inflationary Adjustments) Law, 1985:
According to the law, until 2007, the results for tax purposes were adjusted for the changes
in the Israeli CPI.
In February 2008, the "Knesset" (Israeli parliament) passed an amendment to the Income
Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law starting 2008
and thereafter. Since 2008, the results for tax purposes are measured in nominal values,
excluding certain adjustments for changes in the Israeli CPI carried out in the period up to
December 31, 2007. Adjustments relating to capital gains such as for sale of property
(betterment) and securities continue to apply until disposal. Since 2008, the amendment to
the law includes, among others, the cancellation of the inflationary additions and
deductions and the additional deduction for depreciation (in respect of depreciable assets
purchased after the 2007 tax year).
The Law for the Encouragement of Capital Investments, 1959:
Moach elected year 2012 as year of election. According to the Law, and subject to receiving
the above approval, Moach will be entitled to various tax benefits by virtue of the
"beneficiary enterprise" status, as implied by this Law.
Alternative track:
Under this track, Moach is tax exempt in the first ten years of the benefit period and subject
to tax at the reduced rate of 10%-25% for a period of five / eight years (if the benefit period
qualifying for tax exemption is two years) or one year / four years (if the benefit period
qualifying for tax exemption is six years) for the remaining benefit period (dependent on
the level of foreign investment).
In respect of programs approved prior to the enactment of Amendment No. 60 to the Law,
the benefit period starts with the first year the approved enterprise earns taxable income,
provided that 12 years have not passed since the enterprise began operating and 14 years
have not passed since the approval was granted.
Following the enactment of Amendment No. 60 to the Law, subsequent to April 1, 2005,
companies under the tax benefits track are no longer required to obtain a letter of approval
from the Investment Center but rather must make a notification of the year of election for
the beneficiary enterprise status and are required, among others, to make a minimum
qualifying investment. This condition requires an investment in the acquisition of
productive assets such as machinery and equipment which must be carried out within three
years. The minimum qualifying investment required for setting up a "new plant" is NIS 300
thousand, linked to the Israeli CPI in accordance with the guidelines of the Israeli Tax
Authority. As for plant "expansion", the minimum qualifying investment is the higher of
NIS 300 thousand, linked as stated above, and an amount equivalent to the "qualifying
percentage" of the value of the productive assets. In this context, productive assets that are
used by the plant but not owned by it will also be viewed as productive assets.
- 36 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
The qualifying percentage of the value of the productive assets is as follows:
The value of productive
assets before the expansion
(NIS in millions)
The new investment required as a
percentage of the value of
productive assets
Up to NIS 140
NIS 140 - NIS 500
More than NIS 500
12%
7%
5%
Income qualifying for tax benefits under the alternative track is the taxable income of a
company that has met certain conditions as determined by the Law ("a beneficiary
company") and which is derived from an industrial enterprise. If a dividend is distributed
out of tax exempt profits, as above, Moach will become liable for tax at the rate applicable
to its profits from the beneficiary enterprise in the year in which the income was earned, as
if it was not under the alternative track. Moach's policy is not to distribute such a dividend.
As for beneficiary enterprises in the context of Amendment No. 60 to the Law, the basic
condition for receiving the benefits under this track is that the enterprise contributes to the
country's economic growth and makes a competitive contribution to the Gross Domestic
Product ("a competitive enterprise").
In order for industrial enterprises to comply with this condition, in each tax year during the
benefit period, one of the following conditions must be met:
1.
2.
3.
The industrial enterprise's main field of activity is biotechnology or nanotechnology
as approved by the Head of the Administration of Industrial Research and
Development, prior to the approval of the relevant program.
The industrial enterprise's sales revenues in a specific market during the tax year do
not exceed 75% of its total sales for that tax year. A "market" is defined as a separate
country or customs territory.
At least 25% of the industrial enterprise's overall revenues during the tax year were
generated from the enterprise's sales in a specific market with a population of at least
14 million.
- 37 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment
68):
In January 2011, the Law for Economic Policy for 2011 and 2012 (Legislative
Amendments), 2011 was published which prescribes, among others, amendments to the
Law for the Encouragement of Capital Investments, 1959 ("the Law"). The amendment
became effective as of January 1, 2011. According to the amendment, the benefit tracks in
the Law were modified and a flat tax rate applies to the Company's entire preferred income
under its status as a preferred company with a preferred enterprise. Commencing from the
2011 tax year, the Company can elect (without possibility of reversal) to apply the
amendment in a certain tax year and from that year and thereafter, it will be subject to the
amended tax rates, as detailed below.
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment
71):
In August 2013, the Law for Changing National Priorities (Legislative Amendments for
Achieving Budget Targets for 2013 and 2014), 2013 which includes Amendment 71 to the
Law for the Encouragement of Capital Investments ("the amendment") was published.
According to the amendment, the tax rate on preferred income from a preferred enterprise
in 2014 and thereafter will be 16% (in development area A - 9%). As for the changes in tax
rates resulting from Amendment 73, see below.
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment
73):
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying
the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes
Amendment 73 to the Law for the Encouragement of Capital Investments ("the
amendment") was published. According to the amendment, a preferred enterprise located
in development area A will be subject to a tax rate of 7.5% instead of 9% effective from
January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located in
other areas remains at 16%).
The Law for the Encouragement of Industry (Taxation), 1969:
Moach has the status of an "industrial company", as defined by this law. According to this
status and by virtue of regulations published thereunder, the Company is entitled to claim
a deduction of accelerated depreciation on equipment used in industrial activities, as
determined in the regulations issued under the Inflationary Law. The Company is also
entitled to amortize a patent or rights to use a patent or intellectual property that are used
in the enterprise's development or advancement, to deduct issuance expenses for shares
listed for trading and to file consolidated report under certain conditions.
- 38 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
b.
Tax rates applicable to the Company and subsidiaries:
1.
The Israeli corporate income tax rate was 25% in 2016 and 26.5% in 2015 and 2014.
A company is taxable on its real (non-inflationary) capital gains at the corporate tax
rate in the year of sale.
In August 2013, the Law for Changing National Priorities (Legislative Amendments
for Achieving Budget Targets for 2013 and 2014), 2013 ("the Budget Law") was
published. The Law includes, among others, provisions for the taxation of
revaluation gains effective from August 1, 2013. The provisions regarding
revaluation gains will become effective only after the publication of regulations
defining what should be considered as "retained earnings not subject to corporate
tax" and regulations that set forth provisions for avoiding double taxation of foreign
assets. As of the date of approval of these financial statements, these regulations have
not been published.
On January 5, 2016, the Law for Amending the Income Tax Ordinance (No. 216)
(Reduction of Corporate Tax Rate), 2016 was published, which includes a reduction
of the corporate tax rate from 26.5% to 25%, effective from 2016 and thereafter.
2.
The principal tax rate applicable to Brainsway USA and Inc whose place of
incorporation is outside Israel is:
A company incorporated in the US - weighted tax at the rate of about 35%-40%
(Federal tax, State tax and City tax of the city where the company operates).
c.
Tax assessments:
The Company received final tax assessments through the 2011 tax year. The subsidiary,
Moach, received final tax assessments through 2011. The subsidiary, Inc, received final tax
assessments through the 2012 tax year.
d.
Carryforward losses for tax purposes:
Carryforward losses - the Group:
Carryforward operating tax losses of the Group as of December 31, 2016 total
approximately $ 2.8 million in Brainsway Ltd. and approximately $ 30 million in Moach.
Under the tax laws in the US, carryforward tax losses in the subsidiary may be carried
forward and offset against taxable income during a period of up to 20 years and may be
subject to limitation due to the "change in ownership" in the company. The scope of
changes in the company's ownership may limit the maximal amount of carryforward losses
that could be offset in a specific tax year. Carryforward tax losses of Brainsway USA and
Inc total approximately $ 0.3 million as of December 31, 2016.
- 39 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
e.
Deferred taxes:
As it is not probable that taxable income will be available in the next years, deferred taxes
were not recognized for the above carryforward losses.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES
a.
b.
c.
d.
As for liabilities in respect of payment of royalties to the Chief Scientist, see Note 13b.
The Company engaged with medical centers and academic institutions for performing
clinical trials. In part of the agreements the Company has undertaken to pay royalties
amounting between 0.75% and 1.5% of revenues in the field of the trial if a patent in the
field of the trial is created during the research. The Company is entitled to terminate the
engagements subject to giving an advance notice and there is no additional cost to the
Company for the cancellation.
During 2009-2016, the Company entered into several distribution agreements for the Deep
TMS device with third parties regarding different territories around the world. According
to these distribution agreements, the third parties are granted the exclusive right to market,
distribute, lease, use and promote sales in the different territories for a 10-year period. The
Company will supply the devices to the distributors and they will act on their account to
lease and install them at clients while the device remains the property of the Company. The
different distributors are committed to minimum quantities as in the agreements.
In June 2013, the Company entered into a non-exclusive marketing agreement for the Deep
TMS device with a third party regarding several specific customers in the US. The
agreement is in effect for a 12-month period after closing and will be extended
automatically subject to the mechanism set in the agreement.
In January 2014, an agreement to establish a logistic center in the US which had been
signed with NVation became binding. According to the agreement, a logistic center that
will address the issue of delivery to clients, training, rendering of services and repairs,
training the assistance staff and etc. will be established in consideration of the lower of 5%
of total net revenues (less discounts and returns) from customers in the US and cost + 25%.
On December 31, 2014, the distributor and the Company decided to terminate the above
agreements. When the agreements terminated, the Company undertook to continue paying
the distributor a commission for devices as specified in the agreement up to a ceiling of
$ 456 thousand which, as of December 31, 2016, was paid in full.
- 40 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
e.
In September 2013, the Company entered into a distribution agreement in Japan with
Century Medical Inc., a member of the Itochu concern, which specializes in the import and
distribution of medical devices and equipment in Japan. According to the agreement, the
distributor is granted the exclusive right to market the Company's Deep TMS device for
the treatment of major depression in patients in Japan for a 10-year period after the required
regulatory approvals for marketing the device in Japan are obtained. If the distributor meets
the minimum quantities which it has committed during the contractual term, the agreement
will be extended by additional 5 years. The distributor is granted a right of first offer to
distribute the Company's device in Japan without further codification.
In return for receiving the exclusive right to the Company's device for the treatment of
major depression in patients in Japan, the distributor undertook to pay the Company
distribution fees in the total of 190 million Yen (approximately $ 1.7 million) in two
payments as follows: 100 million Yen (approximately $ 0.9 million) within 10 business
days after the date of closing the agreement and the balance of 90 million Yen
(approximately $ 0.8 million) are payable after the authorities in Japan grant their approval
to market the Company's device in Japan.
In each year of the agreement in which the distributor meets the predetermined revenue
target, 10% of the distribution fees are returned to the distributor. As of December 31, 2013,
the first amount of $ 0.9 million was received from the distributor (this entire amount is
presented as an advance in the item deferred revenues). The distributor will pay the
Company for any treatment made with the Company's device (pay-per-use) but in no case
below the pre-determined annual amount. The agreement prescribes conditions in which
the Company or the distributor can cancel the agreement, including the authorities' demand
to make a clinical trial and non-compliance with the requirement to purchase minimum
predetermined quantities.
The agreement sets a minimum payment threshold to the Company that is examined every
few years throughout the contractual term. If the distributor does not qualify for the
minimum payment threshold at the end of each period, the Company will be entitled to
terminate the distribution agreement, unless the parties reach another agreement between
them. The agreement further determines that the distributor will act on its account to receive
the regulatory approvals that are required to market the Company's device for the treatment
of depression in patients in Japan and to receive an insurance coverage in the price range
established in the agreement.
As of the reporting date, the distributor in Japan is operating with full cooperation from the
Company vis-a-vis the local regulatory authorities to reach an agreement regarding a
regulatory track that finally (subject to compliance and fulfillment of targets set) will allow
the Company to obtain the regulatory approvals to start marketing its devices in the
territory.
- 41 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
f.
g.
During 2013-2016, the Company entered into agreement to perform multicenter trials in
bipolar disorder, smoking, obsessive-compulsive disorder (OCD) and post-traumatic stress
disorder (PTSD) with different medical centers around the world. As of December 31,
2016, the Company's management estimated that the expected balance of expenses in
respect of these trials would total approximately $ 3 million.
On August 25, 2013, the Company received the approval of the MAGNET committee at
the Chief Scientist of the State of Israel for the BSMT tool (brain stimulate and monitor
tool). The tool is for a period of three years, in the framework of which the Company was
approved a work plan for the first year with the scope of approximately NIS 3.7 million at
the rate of grant of up to 66% which the MAGNET administration will give the Company
as non-royalty bearing.
The agreement became binding on November 21, 2013. During January 2014, the
Company's appeal request in respect of the grant in the amount of NIS 600 thousand was
approved thereby placing the work plan at NIS 4.3 million.
On October 2, 2014, the MAGNET committee approved an annual work plan for the
second year with the budget of approximately NIS 4.6 million, of which 66%
(approximately NIS 3 million) the MAGNET administration will give the Company as a
grant.
On October 1, 2015, the MAGNET committee approved an annual work plan for the third
year with the budget of approximately NIS 2.6 million. During December 2015, the
Company's appeal request in respect of the grant in the amount of approximately NIS 175
thousand was approved thereby placing the work plan at approximately NIS 2.8 million, of
which 66% (approximately NIS 1.8 million) the MAGNET administration will give the
Company as a grant.
On October 27, 2016, the MAGNET committee at the Chief Scientist at the Israel
Innovation Authority approved an annual work plan for the fourth year with the budget of
approximately NIS 2.3 million, of which 55% (approximately NIS 1.3 million) the
MAGNET administration will give the Company as a grant.
During 2016, the subsidiary received the approval of the Chief Scientist of the State of
Israel to support research and development projects in the scope of approximately
NIS 6,662 thousand and NIS 2,800 thousand at participation rates of 50% and 30%,
respectively, pursuant to the provisions of the Law for the Encouragement of Industrial
Research and Development, 1984.
- 42 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
h.
i.
In March 2014, the Company entered into an exclusive marketing and distribution
agreement for the Deep TMS device with a third party in Israel for a maximum period of
15 years subject to meeting minimum sales targets as set in the agreement. In April 2014,
the distributor paid the Company a one-time exclusivity fee in the amount of NIS 1 million.
Also, it was agreed with the distributor on a minimum monthly payment for any leased
device and an additional payment based on the number of treatments made with the device
beyond the minimum monthly payment.
In September 2016, the Company entered into an amendment to the original distribution
agreement from December 2015 with a third party so, in addition to the distribution of the
Company's products in Mexico, the Company's products will also be distributed in Brazil.
Concurrently, the Company signed an agreement with the former distributor of the
Company's products in Brazil for the termination and assignment of the distribution
agreement and the ordering of devices by virtue thereof signed in August 2010, which will
allow to fully transfer the distribution activity of the Company's products in Brazil from
the previous distributor to the current distributor.
j.
Commitments:
Operating lease commitment:
The Group has entered into operating leases on vehicles. These leases have an average life
of three years, with no renewal option included in the contract.
Future minimum lease payable under non-cancellable operating leases as of December 31
are as follows:
First year
Second year
Third year
December 31,
2016
2015
U.S. dollars in thousands
105
70
16
191
155
95
19
269
1. Moach has a rent agreement from March 2011 according to which Moach rents
offices in consideration of monthly rentals of approximately NIS 96 thousand, linked
to the Israeli CPI of January 2011. The rent is binding until September 30, 2014. The
rent has terms of renewal until September 30, 2017, subject to giving a notice to the
lessor of at least 4 months before the end of the rent. Moach exercised the option.
- 43 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
In addition, Moach has a rent agreement from July 2015 according to which Moach
rents a warehouse in consideration of monthly rentals of approximately NIS 8
thousand. The rent is binding until July 31, 2017. The rent has terms of renewal until
July 31, 2019 and 2021. The options may be automatically exercised unless Moach
notifies of its intent not to exercise the options until six months before the end of the
last rent period.
2.
USA Inc has a rent agreement from December 2014 which became binding on
January 1, 2015, according to which USA Inc rents offices in the US for six-month
period in consideration of monthly rentals of approximately $ 3 thousand. The rent
may be automatically renewed for six-month periods and the parties may cancel the
rent with a 60-day advance notice without additional payments. This agreement
ended on March 31, 2016. Since April 2016, USA Inc has a rent agreement which
became binding on April 5, 2016, according to which USA Inc rents offices in the
US for a five-year and four-month period until July 31, 2021 in consideration of
monthly rentals of approximately $ 4 thousand. The rent increases every year by 2%.
The agreement can not end before it expires.
Future minimum rentals payable under non-cancellable rent agreements of Moach
and USA Inc as of December 31 are as follows:
First year
Second year
Third year
Fourth year
Fifth year
k.
License agreements:
December 31,
2015
2016
U.S. dollars in thousands
301
53
54
55
32
495
339
243
-
-
-
582
1.
In July 2003, Inc signed a license agreement with NIH - The National Institute of
Health (The American National Institute of Health) ("NIH") according to which the
Company was granted an exclusive license to develop, manufacture, make use of,
market, sell and import products and processes to be developed in the framework of
the license agreement. In return, Inc is committed to pay NIH royalties at fixed
annual amounts of $ 2 thousand from January 1, 2004. In respect of milestones, Inc
will pay $ 10 thousand within 30 days after the approval of the Food and Drug
Administration (FDA) is received. Also, Inc will have to pay in the future royalties
in respect of net sales, as defined in the agreement, amounting 3% of total net sales
in the aggregate of $ 10,000 thousand and 2% of net sales beyond this amount. The
balance of current provision for royalties as of December 31, 2016 was
approximately $ 126 thousand.
- 44 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
If Inc enters into a sub-license agreement, it is committed to pay royalties amounting
8% of the market value of the consideration received for the grant of the sub-license.
Also, Inc is committed to pay to other inventor royalties amounting 0.045% of net
sales and 1.2% of revenues from sub-licenses.
The agreement is binding until the patent rights expire in October 2021. NIH is
entitled to terminate the agreement early if Inc does not comply with the conditions
of the agreement.
2.
In June 2005, Inc signed a research and development agreement with Yeda Research
and Development Company Ltd. ("Yeda"), according to which Yeda gave the
subsidiary an exclusive license to use any research result for research, development,
marketing and manufacturing of products in consideration of royalty payment as
follows: $ 25 thousand when the patent related to the research is approved, royalties
of 1.5% on cumulative sales of up to $ 10,000 thousand and 1% on cumulative sales
of more than $ 10,000 thousand, royalties of 4% of amounts payable to Inc for grant
of commercial sub-licenses, minimal annual royalties of $ 1 thousand from the end
of the research period and one-time sum of $ 5 thousand when commercial marketing
approval in the US or Europe is obtained. If the products use only the research results
without applying patents registered by NIH, the consideration may double the
abovementioned. The balance of current provision for royalties as of December 31,
2016 was approximately $ 63 thousand.
Royalties are payable at the later of 15 years after the first commercial sale or the
patent life (20 years through October 2021). This agreement expires at the later of
the expiration of the last patent, 15 years after Inc starts to sell products integrating
the patent and after a period of 20 years during which no sales are made.
The license agreement with Yeda is subject to modifications in the license agreement
with NIH (see j above) and will be cancelled upon the cancellation of this agreement.
On March 23, 2010, the parties signed an addendum to the agreement in the
framework of which it is agreed and clarified that the agreement with Yeda from
2005 applies to certain patents and, accordingly, the Company is committed to pay
royalties on sale of such patent-based products, according to the provisions of the
agreement. This addendum further determines that the Company will pay reduced
royalties of 1% on sales of Deep TMS device for the treatment of depression in
patients plus $ 50,000 upon the achievement of sales target of $ 10 million of all
products included in the agreement.
- 45 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 18:- EQUITY
a.
Composition of share capital:
December 31, 2016
December 31, 2015
Authorized
Issued and
outstanding Authorized
Number of shares
Issued and
outstanding
Ordinary shares of NIS 0.04
par value each
25,000,000
14,715,784
25,000,000
14,491,034
b. Movement in share capital:
Issued and outstanding capital:
Number of
shares
NIS
par value
Balance at January 1, 2015
14,416,784
145,713
Exercise of share options
74,250
770
Balance at December 31, 2015
14,491,034
146,483
Exercise of share options
224,750
2,349
Balance at December 31, 2016
14,715,784
148,832
c.
Rights attached to shares:
Ordinary shares confer their holders rights to receive dividends in cash and in Company's
shares, right to nominate the Company's directors and rights to participate in distribution
of dividends upon liquidation in proportion to their holdings. Also, Ordinary shareholders
have one vote at the shareholders' meeting such that each share confers one vote to its
holder.
d.
On April 26, 2012, the Company entered into an investment agreement according to which
it raised from several investors approximately $ 4 million in consideration of the issuance
of 532,382 Ordinary shares of NIS 0.04 par value and 532,382 share options, of which
51,672 share options were allocated to the managing underwriters. On June 11, 2012, the
transaction was closed.
- 46 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 18:- EQUITY (Cont.)
Share options are exercisable over a period of three years at the exercise price of NIS 39
per share option. If the issuance of the Company's shares on the NASDAQ is not completed
within one year after the closing of the investment agreement, the exercise period will be
extended by one more year. As described above, if the above issuance is not completed
within 18 months after the closing of the investment agreement, the exercise price will be
reduced to NIS 36. Half of the share options (or all in the event of a "merger" as defined in
the agreement) may be exercised by the investors in a cashless exercise. Further, other
conditions to protect the holders of the share options are established such in the event of
dividend distribution and other events as elaborated in the agreement.
Investors are granted protection from a decline in the value of their investment in cases of
acquisition of the Company or its assets, investment in the Company or issuance on the
NASDAQ for a price that reflects a price per share of less than NIS 34.5 according to
conditions elaborated in the agreement. The protection is in effect until the earlier of the
issuance on the NASDAQ and a raising in a total of $ 25 million, according to the
conditions elaborated in the agreement.
e.
On November 6, 2012, the Company entered into an investment agreement according to
which it raised from a strategic investor in the pharm industry $ 1 million in consideration
of the issuance of 112,406 Ordinary shares of NIS 0.04 par value each and 134,887
unquoted share options each may be exercised into one Ordinary share of NIS 0.04 par
value.
Share options are exercisable from the closing date to June 10, 2015 at the exercise price
of NIS 39 per share option. If the issuance of the Company's shares on the NASDAQ is not
completed by June 10, 2013, the exercise period will be extended by one more year. Also,
if the above issuance is not completed by December 10, 2013, the exercise price will be
reduced to NIS 36. Half of the share options (or all in the event of a "merger" as defined in
the agreement) may be exercised by the investors in a cashless exercise. Further, other
conditions to protect the holders of the share options are established such in the event of
dividend distribution and other events as elaborated in the agreement.
Investors are granted protection from a decline in the value of their investment in cases of
acquisition of the Company or its assets, investment in the Company or issuance on the
NASDAQ for a price that reflects a price per share of less than NIS 34.5 according to
conditions elaborated in the agreement. The protection is in effect until the earlier of the
issuance on the NASDAQ and a raising in a total of $ 25 million, according to the
conditions elaborated in the agreement.
f.
On April 10, 2014, the Company published a shelf prospectus. On March 28, 2016, the
validity of the shelf prospectus was extended to April 10, 2017.
- 47 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 18:- EQUITY (Cont.)
Share options:
In 2016, 899,000 unquoted share options that had been granted to the chairman, directors and an
employee were exercised into 224,750 Ordinary shares of NIS 0.04 par value each in
consideration of approximately $ 179 thousand. In addition, 277,300 and 95,625 share options
that had been granted to employees, officers and a consultant in the subsidiary, USA Inc, who
terminated their employment at the company in 2015 and 2016, respectively, were forfeited and
expired.
On May 30, 2016, following the cessation of Dr. Guy Ezekiel to hold office as the Company's
president, CEO and director, 1,318,191 options exercisable into 1,318,191 Ordinary shares of
NIS 0.04 par value that had been given to him on November 23, 2015 were forfeited. The total
effect on the comprehensive income for the year ended December 31, 2016 was approximately
$ 1,112 thousand of which amounts of $ 445 thousand, $ 119 thousand and $ 548 thousand were
included in research and development expenses, selling and marketing expenses and general and
administrative expenses, respectively.
Capital management in the Company:
The Company's capital management objectives are to preserve the Group's ability to ensure
business continuity thereby creating a return for the shareholders, investors and other interested
parties.
The Company is not under any minimal equity requirements nor is it required to attain a certain
level of capital return.
NOTE 19:- SHARE-BASED PAYMENT
a.
The expense recognized in the financial statements:
The expense recognized in the financial statements for services received is shown in the
following table:
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Equity-settled share-based payment
plans to employees, directors and
consultants
(420)
1,416
1,408
- 48 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 19:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
The share-based payment transactions that the Company granted to its employees are
described below. There have been no modifications or cancellations to any of the employee
benefit plans in 2014-2016.
On July 31, 2014, the Company's general meeting approved to grant to the Company's
deputy CEO who as of December 31, 2016 serves as deputy CEO research and
development 114,000 fully vested share options at the exercise price of NIS 40 per share
per share that are exercisable during a period of 5 years. Half of the share options may be
exercised in a cashless exercise and the other half in a cash exercise. The value of the option
compensation is approximately $ 0.8 million. The entire amount of the expense was
recognized during the third quarter of 2014.
The fair value computation above takes into account the conditions of the share option
listed above as well as the following inputs:
Expected volatility of the share prices (%)
Risk-free interest rate (%)
Share price (NIS)
Expected dividend (NIS)
Contractual life of options (years)
53.99
-%
-%1.84
42.54
%
%0.56
53.12
-
5-0
On December 22, 2014, the Company's Board approved to allocate 110,808 share options
to a consultant and an employee of the sub-subsidiary, Brainsway USA Inc., that may be
exercised into 110,808 Ordinary shares of NIS 0.04 par value for the exercise increment of
NIS 43 per any share option as follows (1) 100,800 options to the consultant will vest in
equal parts over three years on a monthly basis starting January 1, 2015. The exercise
period for options that will vest until December 31, 2015 ends on December 31, 2017; the
exercise period for options that will vest until December 31, 2016 ends on December 31,
2018 and the exercise period for options that will vest until December 31, 2017 ends on
December 31, 2019 (2) 10,008 options to the employee will vest in equal parts on a monthly
basis from January 1, 2015 to December 31, 2015 and may be exercised until December 31,
2017.
The options were allocated to the optionees on March 22, 2015. The grant date fair value
of the options using the binomial model was determined at approximately NIS 1.2 million.
The inputs used for the fair value measurement of the options at the grant date: expected
volatility of the share prices of 43.53%-53.41%, risk-free interest rate of 0.06%-0.82%,
share price of NIS 36.95, exercise coefficient of 2.3-2.8 and expected dividend of 0.
On August 30, 2015, 4,170 options that had been granted to an employee who terminated
employment at the Company were forfeited and on November 29, 2015, the remaining
5,838 options expired. On January 1, 2016, 67,200 options that had been granted to a
consultant who terminated employment at the Company on December 31, 2015 were
forfeited and on April 1, 2016, the remaining 33,600 options expired.
- 49 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 19:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
On November 23, 2015, the general meeting approved to allocate to a director in the
Company, Mr. Yaakov Michelin, 37,597 share options that may be exercised into 37,597
Ordinary shares of NIS 0.04 par value for the exercise increment of NIS 27.97 per any
share option as follows: the options vest over four years; 1/12 of the number of options vest
after 15 months of the date of allocation and 1/12 of the number of options vest after each
subsequent three months. The options are exercisable during a period of 10 years. The grant
date fair value of the options using the binomial model was determined at approximately
$ 117 thousand.
On November 23, 2015, after the approval of the general meeting, a director, president and
the CEO of the Company, Dr. Guy Ezekiel, was allocated 1,318,191 share options that may
be exercised into 1,318,191 Ordinary shares of NIS 0.04 par value for the exercise
increment of NIS 33.58 per any share option as follows: the options vest over four years;
1/4 of the number of options vest after 12 months of June 15, 2015 and 1/16 of the number
of options vest after each subsequent three months. The options are exercisable during a
period of 8 years. The grant date fair value of the options using the binomial model was
determined at approximately $ 3.6 million.
The inputs used for the fair value measurement of the options at the grant date: expected
volatility of the share prices of 43.08%-59.40%, risk-free interest rate of 0.12%-2.16%,
share price of NIS 25.80, exercise coefficient of 2.8 and expected dividend of 0.
On May 30, 2016, following cessation to hold office as director, 1,318,191 options
exercisable into 1,318,191 Ordinary shares of NIS 0.04 par value that had been given to
him on November 23, 2015 were forfeited. The total effect on the comprehensive income
for the year ended December 31, 2016 was approximately $ 1,112 thousand of which
amounts of $ 445 thousand, $ 119 thousand and $ 548 thousand were included in research
and development expenses, selling and marketing expenses and general and administrative
expenses, respectively.
On December 8, 2015, the Company's Board approved to allocate 888,100 share options to
employees of the subsidiary, Moach R&D Services Ltd., and employees and a consultant
of the sub-subsidiary, Brainsway USA Inc., that may be exercised into 888,100 Ordinary
shares of NIS 0.04 par value for the exercise increment of NIS 25.99 and NIS 31.19 per
any of the 384,100 and 504,000 share options, respectively, as follows: the options vest
over four years; 1/12 of the number of options vest after 15 months of the date of allocation
and 1/12 of the number of options vest after each subsequent three months. The options are
exercisable during a period of 10 years. The grant date fair value of the options using the
binomial model was determined at approximately $ 2.3 million.
The inputs used for the fair value measurement of the options at the grant date: expected
volatility of the share prices of 41.89%-59.33%, risk-free interest rate of 0.23%-2.37%,
share price of NIS 25.19, exercise coefficient of 2.3 and expected dividend of 0.
- 50 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 19:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
b. Movement during the year:
The following table lists the number of share options, the weighted average exercise price
of share options and modification in employees and service providers option plans during
the current year:
2016
2015
Number of
options
Weighted
average
exercise
price
$
Number of
options
Weighted
average
exercise
price
$
3,738,413
12.34
1,739,052
12.46
(2,590,116)
22.48
(355,335)
9.69
-
-
2,354,696
32.18
Share options outstanding at
beginning of year
Share options exercised, expired
or forfeited during the year
Share options granted during the
year
Share options outstanding at end
of year
1,148,297
31.18
3,738,413
25.15
Share options exercisable at end
of year
426,400
35.59
1,375,028
12.34
The binomial model is applied when estimating the grant date fair value of options to
employees.
The weighted average remaining contractual life for the share options outstanding as of
December 31, 2016 was about 6 years (2015 - about 6 years).
The range of exercise prices for share options outstanding as of December 31, 2016 was
NIS 13-NIS 59.13 (2015 - NIS 0.01-NIS 59.13).
- 51 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 20:- ADDITIONAL INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME ITEMS
a.
Additional information on revenues:
1.
Revenues from major customers each of which accounts for 10% or more of total
revenues reported in the financial statements:
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Customer A
-
-
649
2.
Revenues reported in the financial statements for each group of similar products and
services:
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Revenues from lease *)
Revenues from sale
5,327
6,197
11,524
4,299
2,501
6,800
2,708
672
3,380
*)
The Company's revenues from lease for the year ended December 31, 2016
include revenues of $ 475 thousand from payment for termination of
agreements for ordering the Company's devices in Brazil.
Geographic information:
Revenues reported in the financial statements derive from the Company's country of
domicile (Israel) and foreign countries based on the location of the customers, are as
follows:
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Israel
Foreign countries *)
441
11,083
11,524
244
6,556
6,800
404
2,976
3,380
*)
In 2016, the Company earned about 79% of its revenues in the US, about 10% in
South America and about 7% in Europe.
In 2015, the Company earned about 76% of its revenues in the US and about 14% in
Europe.
- 52 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 20:- ADDITIONAL INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME ITEMS (Cont.)
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
b.
Cost of revenues:
Cost of lease
Cost of sales
c.
Research and development expenses,
net:
Salaries and related benefits
Subcontractors
Laboratory materials
Patents
Other
Travel abroad
Share-based payment
Depreciation
Less - support by Government grants
d.
Selling and marketing expenses:
Salaries and related expenses
Subcontractors
Distribution commissions
Sales promotion and other
Travel and travel abroad
Share-based payment
Participation in expenses
e.
General and administrative expenses:
Salaries and related expenses
Professional fees and office expenses
Depreciation
Travel abroad
Allowance for doubtful accounts and
bad debts
Share-based payment
Expenses relating to fundraising
1,004
1,423
2,427
2,053
1,885
402
104
273
70
(214)
35
(816)
844
622
1,466
2,408
1,402
463
131
497
40
617
32
(1,487)
404
252
656
2,304
2,017
993
153
781
144
1,271
31
(1,256)
3,792
4,103
6,438
3,293
-
460
746
670
11
-
5,180
1,125
756
49
104
377
(217)
-
1,120
-
324
1,269
336
232
-
3,281
930
676
30
82
170
567
-
464
457
167
597
190
30
(9)
1,896
772
663
11
103
-
107
11
2,194
2,455
1,667
- 53 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 20:- ADDITIONAL INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME ITEMS (Cont.)
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
f.
Finance income:
Interest income on bank deposits
Finance income on share options
Exchange differences
g.
Finance expenses:
Finance expenses from share options
Finance expenses from liability in
respect of Government grants
Exchange differences
Bank commissions
12
56
118
186
-
404
49
61
514
18
618
-
636
-
98
83
37
93
2,759
343
3,195
1,914
525
3
21
218
2,463
NOTE 21:- LOSS PER SHARE
Number of shares and loss used in the computation of loss per share:
2016
Year ended December 31,
2015
2014
Loss
attributable
to equity
holders of
the
Company
U.S. dollars
in
thousands
Loss
attributable
to equity
holders of
the
Company
U.S. dollars
in
thousands
Loss
attributable
to equity
holders of
the
Company
U.S. dollars
in
thousands
Weighted
number of
shares
In
thousands
Weighted
number of
shares
In
thousands
Weighted
number of
shares
In
thousands
Used in the computation of basic
loss
14,507
2,397
14,463
4,087
14,161
6,545
Used in the computation of
diluted loss
14,507
2,454
14,463
4,087
14,261
8,032
To compute diluted loss per share, convertible securities have not been taken into account since
their conversion has anti-dilutive effect.
- 54 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
a.
Balances with interested and related parties:
Composition:
As of December 31, 2016:
Key
management
personnel *)
Other
interested and
related
parties
U.S. dollars in thousands
Other accounts payable
48
75
As of December 31, 2015:
Key
management
personnel *)
Other
interested and
related
parties
U.S. dollars in thousands
Other accounts payable
54
72
*)
Some of the key management personnel are interested parties by virtue of holdings.
b.
Benefits to interested and related parties:
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Salary and related benefits to those
employed by the Company or on its
behalf
1,137
1,548
1,499
Directors' fee to those not employed by
the Company or on its behalf
137
80
61
Number of individuals to whom the
salary and benefits relate:
Related and interested parties
employed by the Company or on its
behalf
Directors not employed by the
Company
9
9
18
11
8
19
9
16
7
- 55 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
c.
Benefits to key management personnel *):
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Short-term employee benefits
Share-based payment
20
377
31
1,202
(13)
968
*)
Some of the key management personnel are interested parties by virtue of holdings.
d.
Purchases from related parties:
2016
Year ended December 31,
2015
U.S. dollars in thousands
2014
Purchases from related parties
-
9
48
e.
Transactions with interested and related parties:
Year ended December 31, 2016:
Sales to subsidiary
Research and development expenses
Marketing expenses
General and administrative expenses
Key
management
personnel *)
Other
interested and
related
parties
U.S. dollars in thousands
-
743
100
691
1,534
2,120
-
-
137
2,257
*)
Some of the key management personnel are interested parties by virtue of holdings.
- 56 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
Year ended December 31, 2015:
Costs of property, plant and equipment
Sales to subsidiary
Research and development expenses
Marketing expenses
General and administrative expenses
Year ended December 31, 2014:
Costs of property, plant and equipment
Research and development expenses
Marketing expenses
General and administrative expenses
Key
management
personnel *)
Other
interested and
related
parties
U.S. dollars in thousands
-
-
897
235
1,569
2,701
9
285
-
-
80
374
Key
management
personnel *)
Other
interested and
related
parties
U.S. dollars in thousands
-
1,706
257
491
2,454
48
-
-
61
109
*)
Some of the key management personnel are interested parties by virtue of holdings.
f.
On May 18, 2015, the Company informed on the appointment of a new president and CEO
for the Company, Dr. Guy Ezekiel, who started his four-year tenure on June 15, 2015 ("the
contractual term"). On June 22, 2015, the general meeting approved his conditions of
employment which consist of, besides monthly payment, the following bonuses: (1) an
annual bonus based on the Company's remuneration policy according to the decision of the
Company's Board; (2) bonuses of $ 500 thousand to be granted based on target
achievements as outlined in his agreement. As of the date of the approval of the financial
statements, the Company's management has no expectation that these targets will be
achieved and, accordingly, no expense was recognized in the financial statements.
g.
On June 22, 2015, the general meeting approved also the conditions of Dr. Guy Ezekiel in
his position as director of the Company, if appointed a director by the Company's general
meeting. On November 23, 2015, the general meeting approved the appointment.
- 57 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
h.
For occupying the position of a director of the Company, Dr. Guy Ezekiel is entitled to
options to purchase Company's shares based on the vesting terms detailed in the agreement
with him as follows: (1) the first portion: subject to and after the service agreement becomes
effective - 1,318,191 options to purchase 1,318,191 Ordinary shares of the Company of
NIS 0.04 par value each for the exercise price of NIS 33.58 which, as of June 22, 2015, the
date on which the general meeting was convened, represented 7.78% of the Company's
issued and outstanding capital on a fully diluted basis; (2) the second portion: subject to
and after the term of the agreement is extended by three additional years ("the extension
period") and subject to all approvals required under the law, including the approvals of the
authorized organs of the Company and the stock exchange - Dr. Guy Ezekiel will be entitled
to receive additional options to purchase Ordinary shares of the Company of NIS 0.04 par
value each which, as of the date of grant, will represent 3.5% of the Company's issued and
outstanding capital on a fully diluted basis for the exercise price to be determined according
to the average closing market price of the share during 30 days before the Board's resolution
on the allocation of the portion.
As for the value of the options allocated to Dr. Ezekiel, see Note 19.
On May 29, 2016, Dr. Guy Ezekiel informed of his decision to cease his role as a CEO of
the Company. His role as a director discontinued immediately and he served in his position
as a CEO until July 28, 2016
i.
On October 18, 2015, the Company's remuneration committee and Board approved to
change the consulting fees to Dr. David Zchut, the chairman of the Board. This was
approved by the general meeting which convened on November 23, 2015, as follows: for
the period from September 1, 2014 to June 30, 2015, the consulting fees were raised from
NIS 25 thousand a month for consulting services at the scope of 20% of full time
employment to NIS 52.5 thousand a month for consulting services at the scope of 70% of
full time employment. After July 1, 2015, his salary was raised to NIS 30 thousand a month
for consulting services at the scope of 40% of full time employment.
On September 4, 2016, the Company's general meeting approved to appoint Dr. David
Zchut, the chairman of the Board, as an interim CEO of the Company starting July 28,
2016, until the shorter of the day when a new CEO begins his role and a one-year period.
Accordingly, since May 30, 2016 (the date of announcement of the former CEO
resignation), the scope of employment of Dr. Zchut increased to a 100% time job adhering
to the Company's remuneration policy and without giving him additional compensation
(except what derives from the scope of his job growth in the relevant period) for his role as
an interim CEO.
j.
On July 14, 2016, the Company's VP of global sales ceased his role.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 23:- EVENTS AFTER THE REPORTING DATE
a.
b.
During 2017 through the date of the approval of the financial statements, 8,000 share
options that had been granted to an employee who terminated employment at the Company
in 2017 were forfeited.
On January 8, 2017, the Company informed on the appointment of a new CEO for the
Company, Mr. Yaakov Michelin, who will start his tenure on April 1, 2017. On
February 12, 2017, the general meeting approved his conditions of employment which
consist of, besides monthly payment, the following bonuses: (1) an annual bonus based on
the Company's remuneration policy according to the decision of the Company's Board; (2)
bonuses of NIS 1 million to be granted based on target achievements as outlined in his
agreement.
In addition, with the commencement of his tenure, Mr. Yaakov Michelin is entitled to
566,262 options to purchase 566,262 Ordinary shares of the Company of NIS 0.04 par
value each for the exercise price of NIS 19.97 which, as of January 5, 2017, the date on
which the Board approved the employment conditions, represented 3.6% of the Company's
issued and outstanding capital on a fully diluted basis. The price was determined according
to the average closing market price of the share during 30 days before the Board's
resolution. The options vest and become exercisable over four years starting from the date
of allocation at dates as outlined in his agreement.
NOTE 24:- APPROVAL OF THE FINANCIAL STATEMENTS
On March 19, 2017, the Company's Board authorized Mr. Avner Hagai, a director in the Company
who serves as the vice chairman, to sign the financial statements of the Company, as required for
purposes of approval of financial statements, because in the Company serves an interim CEO.
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